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US-China talks loom as trade deal hangs in the balance

Even a week ago, top administration officials appeared bullish on the chances a deal would soon be struck with China. But backtracking by the Chinese and an emboldened President Donald Trump have dampened the optimism, and on Wednesday evening the President had already seemed to write off the chances of a breakthrough.

Still, just the presence of the top Chinese negotiator in Washington was a sign to officials that progress could be made. And Trump remains hopeful an agreement can be struck that would lift markets and, in his view, help him politically.

The talks were set to begin Thursday evening at 5 p.m. ET, followed by a dinner between the Chinese Vice Premier Liu He and US officials, including Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.

They will continue into Friday, but by then the deadline for the tariff increase will have passed. Trump says he plans to raise tariffs to 25% on $200 billion of Chinese products at midnight Thursday, a move that has roiled global markets and thrown the talks into flux.

If the talks go well, the tariffs may not go into effect, according to people close to the situation. But merely the chance the tariffs could increase was already pushing equity markets lower on Thursday.

Progress toward a deal was derailed last week following a round of talks in Beijing. While US officials departed the Chinese capital confident, they were later surprised by new Chinese demands the US characterized as backtracking on agreed-to commitments.

That included promises by China to codify into law changes to certain economic practices — an aspect of the deal US officials had believed was settled, but which Chinese officials objected to.

Trump, who has called Chinese President Xi Jinping a close friend, said Thursday he believed the US would come out well whether a deal is struck or not.

“They’re flying in, the vice premier is flying in tomorrow — good man — but they broke the deal. They can’t do that,” Trump said at his rally. “If we don’t make the deal, nothing wrong with taking in over $100 billion a year. We never did that before.”

Right now, there are no set plans for Trump to meet with Liu when he’s in Washington this week, according to US officials. Trump has met with Liu during his past visits to Washington as the two sides appeared to be getting closer to an agreement. But with both sides hardening in their negotiating stance, the White House decided this week that talks should not include Trump this time.

Still, that could change if this week’s discussions prove fruitful. If Trump does meet with Liu, it would be a sign that talks are making progress, officials said. The decision would likely be made at the last minute.

After Trump threatened new tariffs on China in a tweet last weekend, Liu’s planned visit was thrown into question. Trump’s Sunday tweet was meant to rattle Beijing, and it came without extensive discussions among his economic team, officials said. A person familiar with Trump’s thinking added that the President also believed his team would be better positioned to extract concessions from China with the threat of additional tariffs.

US officials viewed it as a good sign the Chinese negotiator actually made the trip, albeit with a reduced delegation.

For now, however, planning has been halted on a summit meeting between Trump and Xi. White House officials had begun preliminary work toward arranging the meeting when it appeared talks were on their way to a resolution. And lawmakers have received word from administration officials that a tariff hike is likely this week, even as talks move forward.